Dublin-based building materials group CRH has raised €1.6 billion via a placing of just more than 74 million new ordinary shares to help fund its acquisition of €6.5 billion worth of assets from European rivals Lafarge and Holcim, who are planning to merge their operations.
The shares were placed today by UBS, JP Morgan, Merrill Lynch and Davy at £16.50 a share or a euro equivalent of €21.85. This represented 9.99 per cent of CRH's issued share capital.
CRH also plans to use €2 billion of its own cash resources and about €3 billion in debt to fund the transaction, which is expected to close in mid 2015.
The Irish company, which has its primary stock market listing in London, had earlier announced a binding commitment to acquire certain assets from European rivals Lafarge and Holcim, who are offloading these businesses to win regulatory approval for a $40 billion (€35 billion) merger announced last year.
The deal involves CRH acquiring assets in Canada, western Europe, central and eastern Europe, and a number of emerging markets.
CRH expects the deal to be about 25 per cent accretive to underlying earnings and will generate a ROIC in line with CRH’s weighted average cost of capital in the first full year of ownership.
“Return on equity is expected to be in the high teens in 2016,” CRH said.
Albert Manifold said that the deal represents "a significant value creation opportunity for CRH".
“We are acquiring a quality portfolio of assets, which complement our existing positions, at an attractive valuation and at the right point of the cycle. The acquisition strengthens our presence in important markets across North America, western, central and eastern Europe as well as providing new platforms for growth in emerging markets,” he said.
UK Assets
In a note, Davy Stockbrokers said that the acquisition “ is not only substantially accretive to earnings and returns, it also provides the company with new platforms for growth in both emerging and developed markets”.
The acquisition requires the approval of shareholders, and an egm will be held in due course. The acquisition is also conditional upon the successful completion of the merger of Holcim and Lafarge, and completion of local re-organisation plans.
In a conference call with investors Monday morning, Mr Manifold said that it is in discussions with KKR regarding a disposal of some of its UK assets.
CRH also updated the market on its trading outlook on Monday, indicating that it expects full-year earnings (EBITDA) to be not less than than € 1.625 billion with full year revenues of € 18.9 billion.
